PMMAF - Puma posts record annual sales forecasts further margin pressure in 2023

German sportswear giant Puma ( OTCPK:PUMSY ) reported record annual sales for 2022 on Wednesday, but noted that continued inflationary impacts will hamper margins in the year ahead.

For the fourth quarter, the company said that sales increased by 21.1% year over year to €2.2B, driven by strength across all regions save for the Asia Pacific. Management noted that continued COVID-19 lockdown measures into year-end held back sales in China and constrained the region overall.

“2022 was a record year for PUMA. We accelerated our growth across all product categories and worldwide despite a volatile market environment,” newly-minted CEO Arne Freundt said. “While facing some economic headwinds in 2023, we remain hungry and will advance the execution of our successful strategy. We will focus on elevating our brand strength and on winning market share in the U.S. and China.”

However, gross profit margin decreased by 420 basis points to 44% as a result of both promotional activity and higher costs in terms of raw materials and freight rates. Net earnings decreased by 82% from Q4 2021 to €1.4M translating to just € 0.01 in earnings per share as compared to € 0.05 in the year prior.

Moving forward, management said that a “high degree of geopolitical, macroeconomic and commercial uncertainty” in 2023 as well as still-elevated inventory levels are expected to impact results. Inventories closed 2022 up 50.4% from 2021 to €2.25B.

Puma expects sales growth in the high single-digit percentage range and operating EBIT in a range of €590M to €670M. Management said that “sales growth and market share gains will have priority over short-term profitability” in the year ahead.

“Given the timing of these unfavorable factors, we expect the gross profit margin to be under more pressure in the first half of the year than in the second half,” the earnings release stated. “For the full year 2023, PUMA expects currencies, higher freight rates and raw material prices to again dilute profitability.”

Read more on former Puma CEO Bjorn Gulden’s transition to crosstown rival Adidas .

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